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Charities urged to consider investing with data showing around £31bn of assets held in cash
Melanie May | 4 June 2024 | News
Analysis of 2022 data from The Charity Commission suggests that a significant portion of charity assets could be sitting idle, with charities urged to consider the societal and financial benefits that can be gained through investing.
The findings from independent consultancy Broadstone showed that UK charities with an annual income of at least £0.5 million, owned a total of £250 billion in assets, of which 13%, or £31 billion, was held in cash.
No long-term investments for more than half of charities
Analysis also revealed that more than half – approximately 58% – of the 12,973 UK charities sampled did not hold any long-term investments. This, Broadstone says, means that more than half of the largest UK charities only hold cash-like assets and fixed assets such as land, buildings, equipment and vehicles.
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It suggests that with 59% (£147 billion) of the assets held by these 12,973 charities being unrestricted, a large proportion of charities could be missing out on the returns possible if they invested.
Potential returns from investing
Assuming that this £31 billion of cash was held in current accounts for a year and was not accruing interest. In this case, Broadstone’s analysis finds that the charity sector could have benefitted from up to £1.5 billion of investment returns, had this money been held in a typical Money Market Fund offering returns in line with market rates of interest. This is also assuming a 5% return on £31bn of assets over a year.
Charity Commission guidance
The consultancy highlights the Charity Commission’s CC14 guidance for trustees on investing charity money, which emphasises that investment decisions should be made to “further your charity’s purpose”. ‘Social investing’ is also mentioned in the guidance – “where charity trustees use money or property with a view to both achieving their charity’s purposes directly through the investment and making a financial return.”
Commenting, Rachel Titchen, Charities and Investment Director at Broadstone, said:
u003c!u002du002d wp:paragraph u002du002du003ernrn“Most charities see cash as the safest and most reliable financial vehicle to store their assets, but in reality, it may be holding them back from achieving their charitable objectives.rnrnu0026nbsp;rnrnu003c!u002du002d /wp:paragraph u002du002du003e u003c!u002du002d wp:paragraph u002du002du003ernrn“Recent inflation levels, geopolitical shocks, and currency fluctuations have all eroded the real value of liquid assets like cash, slowing down the progress of charities and hindering their ability to fund their missions – especially those with un-tailored and inflexible strategies in place to achieve their goals.rnrnu003c!u002du002d /wp:paragraph u002du002du003e u003c!u002du002d wp:paragraph u002du002du003ernrnu0026nbsp;rnrn“Investing doesn’t have to be daunting or high-risk. In fact, there are a number of secure investment vehicles that are practical, uncomplicated, likely to provide a good return, and crucially – ‘mission aligned’.rnrnu003c!u002du002d /wp:paragraph u002du002du003e u003c!u002du002d wp:paragraph u002du002du003ernrnu0026nbsp;rnrn“At its core, investing is a tool to be used by Trustees to drive forward their objectives. A decision not to invest assets is a decision that needs to be documented within an Investment Policy.rnrnu003c!u002du002d /wp:paragraph u002du002du003e u003c!u002du002d wp:paragraph u002du002du003ernrnu0026nbsp;rnrn“We urge charities who are holding excessive cash to speak to an investment consultant to consider whether training for the Finance Team and Finance sub-committee could be helpful. Using an Investment Consultant can give you the expertise you need to make investment decisions, especially when that expertise isn’t currently available on the Board or in-house.rnrnu003c!u002du002d /wp:paragraph u002du002du003e u003c!u002du002d wp:paragraph u002du002du003ernrnu0026nbsp;rnrn“Charities should feel empowered by their assets. We’d love to see Trustees making the most of market opportunities to further their missions.”rnrnu003c!u002du002d /wp:paragraph u002du002du003e
- Value of charities’ investable assets improves, study shows (21 November 2024)
- New governance principles launched to guide charities’ investment decisions (17 January 2025)
- Not enough charities investing responsibly (13 May 2003)
About Melanie May
Melanie May is a journalist and copywriter specialising in writing both for and about the charity and marketing services sectors since 2001. She can be reached via thepurplepim.com.